P8 billion budget deficit projected

Publishing Date : 02 October, 2017

Author : REARABILWE RAMAPHANE

Matambo decries misuse and reckless spending by Government

The Minister of Finance and Economic Development Kenneth Matambo has warned that the 2018/19 budget will carry a deficit of around 8 billion pula primarily due to continued slow growth in revenues and increased expenditure pressures.

Minister Matambo revealed the development to stakeholders at a Budget Pitso on Tuesday. Government had also expected the first three financial years of National Development Plan 11 to run on budget deficit.

According to the minister, growth in total revenue had been restrained by relatively weak commodity prices.

Reading from the Budget Strategy Paper, a blueprint for the budget produced annually at least three months before the Budget Speech, Matambo noted clearly the need to apply strict fiscal discipline throughout the public sector if government is to contain the expected budget deficits in the medium term, given the constrained resources envelope.

Minister Matambo further advised against misuse of resources and reckless spending by government arms and department encouraging the citizenry and civil service to efficiently and effectively deploy government limited resources to provide the necessary economic infrastructure needed for growth and basic social services.

The Finance Minister told attendants that government will closely monitor expenditure and exit funds during the 2018/2019 financial year to ensure that the limited resources and funds are put to good use.

“The projected global growth rates for 2017 and 2018 although higher than 2016 are below the pre-crisis averages, especially for most advanced economies and for commodity-exporting emerging and developing economies,” he said.

It also emerged at the meeting that to avoid being caught up in the vicious circle of deficits and debt, there was need for continued focus on prudent management of expenditure in order to achieve goals envisioned under national priority areas identified in the National Development Plan (NDP) 11.

Government emphasized its acting plan as stated in NDP 11 which clearly states the need to tackle the problem of reducing or eliminating abject poverty, creating sustainable employment opportunities and improving income inequality. Botswana’s income inequality is ranked amongst the worst in the world indicating a concerning difference between the rich and the poor.

Matambo also highlighted that the domestic economy had rebounded to register a positive growth rate of 4.3 per cent in 2016, after experiencing mild recession in 2015. He noted that the national economic growth momentum was anticipated to continue in 2017 and 2018 as the economy is expected to register a growth rate of 4.7 per cent and 5.3 per cent respectively.

“The growth rate will largely be supported by the services sector,” he said. The inflation rate was said to have been stable and projected to remain as such in the medium term, within the Bank of Botswana objective range of three to six per cent. Notwithstanding the inflation rate stability it was cautioned that the rebound in commodity prices and food prices posed upside risks to the inflation outlook.

Economic and Financial Policy Secretary in the Ministry of Finance Dr Taufila Nyamadzabo said that Botswana’s economy was stable and impressively recovering from the recent economic meltdown.

Dr Nyamadzabo reiterated Matambo’s sentiments that after recording a decline of -1.7 per cent in 2015, the domestic economy recovered strongly to register a positive growth of 4.3 per cent in 2016.

He observed that the positive rebound in the domestic economy was largely due to the improvement in the trade, Hotels and restaurants as well as transport and communications sectors, which recorded positive growth rates of 13.5 per cent and 5.6 per cent respectively.

The growth in the trade, hotels and restaurants sector was mainly driven by the downstream diamond industries, which contributed significantly to the wholesale sub-sector.

The Financial Policy think tank reiterated that the water and electricity sector, which supported other sectors, registered a higher growth of 123.0 per cent in 2016, but its contribution to the Gross Domestic Product was insignificant. Other sectors, which recorded positive growth rates in 2016, were construction with 4.2 per cent and finance and banking services with 3.8 per cent.

The agriculture and mining sectors, however recorded negative growth rates in 2016 with the latter mainly due to the decline in the copper production as well as the provisional liquidation of the BCL Mine in October last year.

The mining sector was expected to recover in line with the positive global economic prospects, while the other sectors would continue to benefit from the implementation of the Economic Stimulus Programme (ESP) adopted by government to boost economic growth and create employment opportunities.

In terms of domestic economic outlook, Dr Nyamadzabo noted that the GDP was projected to grow by 4.7 per cent, 5.3 per cent and 5.0 per cent in 2017, 2018 and 2019 receptively.

Stakeholders were told that the average economic growth during the National Development Plan 10 was 3.9% per annum, which was slightly above the 3.3 per cent target, but below the 7.5 per cent Vision 2016 target.

Experts have noted that some downside risks that come with positive global economic outlook, which among others include structural problems such as low productivity growth and high income inequality would negatively impact Botswana’s economic growth is not accommodated for by budgets and fiscal projections.